The more data that comes out, the more irrational the recent market meltdown and the supposed reasons behind it look. Yesterday provided opportunities to assess the health of the US consumer; a very important demographic because the personal consumption and expenditure (PCE) among American consumers accounts for as much as 7% of US GDP.
Retail sales data for July came in at 1%, ahead of growth forecasts of 0.3%. In fact, it was the biggest gain in the monthly data since January 2023. These numbers were boosted by a 3.6% jump in sales of autos and parts, a 1.5% rise in groceries and a 1.6% jump in electronics sales. Building materials and gardening equipment sales also rose by 0.9%, which flew in the face of a recent warning from Home Depot.
It wasn't only official data that suggested the US consumer was still in rude health. Walmart reported forecast-busting earnings and raised guidance at the same time, saying it was seeing “higher engagement among all income cohorts”. The stock rallied by as much as 8% before settling at a 6.58% gain on the day. At its peak, Walmart stock registered a 4-standard deviation move, something that, statistically speaking should only happen on one trading day in every 126 years.
As of Wednesday’s close, the US consumer discrectionary sector had been the worst performer over the last month. The two data points discussed above combined to produce a 3.38% gain, but the sector remains down more than 5% across the last month.
Walmart wasn't the only consumer facing stock to post significant gains. Ulta Beauty jumped by 11.17% as Warren Buffet’s Berkshire Hathaway disclosed a stake in the retailer. Mr Buffet had been recently selling down stakes in stocks such as Apple and the Bank of America. Traders took his interest in Ulta Beauty as a vote of confidence in the name, and the share price responded accordingly.
Not all price moves were so easily explained, however. Lithium refiner Albemarle, which had fallen by 5.66% on Wednesday, rebounded by 8.63% in Thursday’s session, notably trading more than twice its average daily volume as it did so.
The S&P 500 added 1.6% on the day, the Nasdaq 100 rallied by 2.5% and the Dow Jones put on 1.4%. A high 85% of issues listed on the NYSE advanced on the day, while 74% of Nasdaq-listed equites were higher, and buying volume across both exchanges outweighed selling by a margin of more than 3:1 according to data from barchart.com.
There were losers on the day, including business automation software maker Fair Isaac which fell by 4.2%, and fixed-income trading platform, MarketAxess, which lost 2.93%. However, both names have posted solid monthly gains and so these moves smacked of profit-taking/rotation.
Major European equity markets also made gains yesterday. The Euro STOXX 50 index advanced by 1.7% to close above its 50-day moving average for the first time this month.
Dutch online payments group Adyen has been a stock to watch this week as it has added more than 19% in the last five trading days. It can be easy to overlook technology names in Europe in favour of the US, but European names can be movers too. Adyen’s share price has climbed by 98% over the last five years, with the company delivering compounded earnings per share (EPS) growth of 38% during that period (source: Simply Wall Street).
Today’s economic calendar is somewhat muted compared to yesterday, though there is housing starts and building permits data in the US at 1.30pm (UK time), alongside the closely watched Michigan consumer sentiment survey at 3pm (UK time).
Oil is trading marginally lower in early European trade, though both Brent and WTI are up on the week. Gold and silver are also lower from the open this morning.
10-year US treasury bond yields are largely unchanged and down fractionally on the week. Equity indices are trading higher in Europe, taking a lead from Japan where the Nikkei 225 gained 3.64%. The odd one out is the FTSE 100, which has opened down by 0.25%. Miners, housebuilders and utilities have led the index lower this morning, despite 2% gains at retailer JD Sports Fashion and hotel group IHG.